Hmm, I am not finding anything that would allow you to charge without an opt-in. I read and re-read the exception on page 80 but all I am getting out of it (and correct me if I'm missing the point) is the exception to having to do the notice and opt-in. I don't see anything that would let you pay the OD and charge. If you have the policy in place to always decline, do you ever deal with ODs now? If you deal with them due to merchant posting delays, you'll have to have the same policy once this is effective, but I don't think you can charge (but I'm not sure...) What would happen if you posted a $4.00 lunch transaction that overdrew the customer by $3.00 and then hit them with a $29 OD fee? If the customer did some research, couldn't they complain that you're violating Reg E because they never opted in? But if you just don't ever run into situations like that and always decline everything, then I think you're ok.

Now I'm just confusing myself.

Thanks Mauraga...we are a bit confused also...that's why I'm throwing it out there for all you BOLers to comment...

Anyone else have any insight???? Pretty please???

NOTE: I am retracting this answer, and you'll see why below.

Yes, I believe you can, and you can apply that exception on an account-by-account basis.

If you have a policy and practice of declining to authorize and pay any ATM or one-time debit card transactions when you have a reasonable belief at the time of the authorization request that the consumer does not have sufficient funds available to cover the transaction, the requirements of §205.17(b)(1) do not apply.

In such a case, go back and read the regulation without paragraph 17(b)(1). The prohibition against charging a fee without an opt-in goes away.

But doesn't page 51 discuss the two proposed exceptions to the fee prohibition - one of which was that you would be able to charge a OD fee if the institution had a reasonable belief that sufficient funds were available when the transaction was authorized but weren't when the transaction settled? This proposed exception was not included in the final rule.

To me it seems that we can't charge a fee for this situation, regardless of whether we are a bank that declines transactions when funds aren't available. We would just be relieved of complying with the notice and opt-in requirements.

Confused as usual

No AuditorK, you are correct. No notice, no opt-in....can't charge a fee. If your bank's policy & proc are set up to decline these trans and you do pay one, you're ok with notice & opt-in, but still can't chg a fee.

From the commentary to 17(b)(2)

2. No affirmative consent. A financial institution may pay overdrafts for ATM and one-time debit card transactions even if a consumer has not affirmatively consented or opted in to the institution’s overdraft service. If the institution pays such an overdraft without the consumer’s affirmative consent, however, it may not impose a fee or charge for doing so.

Also see pg 52 (bottom of pg) and the top of pg 53 of the preamble.

This response deleted to omit incorrect information, based on receipt of clarification from Fed. -- JSB

So if the bank has a policy not to pay ATM and debit card transactions on any accounts - can ODP fees be assessed when the trans was below the merchant floor (where they don't get auth under a certain amt) and it overdraws an acct? We don't have control over this.

My first reaction was to say no, because the element of an authorization isn't present. But now that I re-read the regulation, comment and supplemental information for the umpteenth time, I am not so sure. You could be right, ahou.

I have put out a feeler to the Fed, and will come back here with what I find out.

THANK YOU ALL for the conversation and to JOHN for approaching the Fed. I am very interested in their interpretation since we seem to be able to interpret it either way.

Exactly, once folks start seeing the debit card purchase denied when they have a basket full of food at Walmart, that should be interesting? They will not be happy. Walmart will not either as they will have to put all back maybe? Well, I really would rather happy to see Walmart suffer...(my out loud voice)...

In light of the new rules, it may be more cost effective for us to retrain our customers to use PIN based POS transactions, instead of the signature based transactions that we have been promoting for years.

So, there is nothing in the Reg E rule or proposed legislation that restricts or otherwise prohibits charging a fee for returning an item - correct?

That is correct. On the question of imposing a fee, however, for declining an authorization request for an ATM or debit card transaction, consider the following, quoted from page 34 of the Fed's 93-page Federal Register submission document:

John, do you think that core providers are going to be ready by July 1 to be able to identify and systematically handle the fee/no fee, opt in/out? These systems don't have these fields today and the logic isn't there either.

With the last-minute delay on Reg GG, I'm hoping and praying for the same with Reg E. Our core provider hasn't even attempted (or considered) to make any changes yet - my understanding is that they are waiting to give the powers that be more time to consider the final (final, final) ruling, before they tackle such an issue. In the mean time, it makes it very difficult for us to consider P&P when we don't know what our system limitiations will be...

Here's the scoop, from my source at the Fed:

• The wording of the exception in .17(b)(4) is that the "requirements of § 205.17(b)(1) do not apply to an institution that has a policy and practice of declining ...."
• It is intended that such an institution would, however, still be bound by the prohibitions in § 205.17(b)(1) against assessing an overdraft fee or charge.
• Fed staff agrees that it needs to clarify how .17(b)(4) will work because the current wording can be misinterpreted, and will do so along with any other issues that need clarification.

So, while such institutions may not need to go to the effort of providing opt-in disclosures and forms or procedures with respect to applicable account products, they will have to, in my opinion --

• cease imposing any fee or charge they might currently be imposing for ATM or one-time POS debits that might create an overdraft notwithstanding their attempts to prevent them at time of authorization
• consider altering their posting priorities to ensure that ATM and debit card transactions post before other debit items on a given posting day
• review and update if necessary their account disclosures under Reg DD §230.4(b)(4) as they relate to types of transactions that may result in an overdraft fee.

I think that the key changes that will have to be made to systems is the ability to assess a fee or not based on the type of transaction. If the system can discriminate between ATM and POS debits on the one hand and ACH, check and internal debits (loan payments, transfers) on the other hand and base the fee decision on which group the transaction is in, you could manage the opt-in by assigning a separate class code or product code to accounts that have opted in.

John is probably correct. Check your transaction code parameters. Each transaction code should enable you to indicate if a charge should apply.

John - thanks for obtaining the clarification from the Fed. Sadly, I liked your first answer better.

On second thought, it’s probably not a good idea to mess with the transaction code parameters.

As John said, it would be nice if core providers can help us out with some enhancements that will automate this. Otherwise, we will be relying on our Operations Officers to make these decisions on a daily basis.

I can't wait to see the Fed's clarification on the exception language! I hope they intend to so this soon!

John,

I had read it the "other" way, and convinced myself that regulators' reasoning for allowing banks to charge for inadvertent debit card overdrafts when a customer did not have an overdraft limit was that this scenario would provide incentive for banks to NOT have customers in overdraft programs (perhaps an implicit aim of regulators). The wording as it is is convoluted on a good day.

Thanks John for the research and update.

Keep in mind though, that as with the Reg. GG rules, all is subject to change in the 11th hour.

Sure makes it difficult to "play by the rules" when the rules keep changing.

John, Thanks for the Fed information.

Our bank does not authorize ATM or POS withdrawals that we know would create an overdraft. However, when they finally arrive, who knows. Do I understand the Fed to be saying the only way we could charge a fee for this type of overdraft is to go through the whole opt-in process?

I'm just starting to read through this proposal. If I understand it correctly, its focus is on fees charged for overdrafts, especially those caused by ATM and POS transactions. If someone has already arranged to link his/her DDA to a line of credit, and the institution has no bounce protection service, then does that institution need to do anything?

I saw that any opt-in disclosure needs to mention the availability of linking accounts, for any institution that offers that possibility.

Thanks, as usual....